The reference of course, is to Hicks (1937): “Mr Keynes and the ‘Classics’: A Suggested Interpretation”. An important, sprawling book of economic analysis. A complex and nonobvious relationship to a previous economics literature. Large political economy and policy stakes at hazard. Is this John Maynard Keynes's General Theory of Employment, Interest, and Money? Or is this Thomas Piketty’s Capital in the Twenty-First Century? READ MOAR

I find the parallels intriguing. And so I am taking my task to be the task that John Hicks took upon himself back in 1937 with his "Mr. Keynes and the 'Classics': A Suggested Interpretation": to build a bridge between Piketty's formulations of the big issues and other, previous formulations that may be more standard and more familiar. Like Hicks's, this bridge-building is immensely powerful but also immensely limited.

My reference is meant both as an endorsement of the power of the Hicks (1937) research project and as a recognition of its limitations. But to those who say they do not like the architecture of my bridge, I say: go build your own.

First, however, there are no fewer than seven things that you really need to note about this book:

Piketty's book is not a book about the U.S. today: this is a book that is, mostly, about primarily France and secondarily Britain in the Belle Époque back before World War I and the Ancien Régime back before the Napoleonic wars.

The book is also, perhaps, about the U.S. and the North Atlantic in 2070 or so, when the processes that Thomas Piketty points to that have placed the U.S. and the rest of the North Atlantic on the Bell Époque will have had some time to gather force and speed.

This is not a book about living standards--not about material wealth or immiserization.

It is, instead, a book that meditates on how the Belle Époque road that the U.S. may have started down in 1980 will eventually introduce an enormous amount of slippage between our wealth and our average utility, our social welfare.

It is, instead, a book that meditates on how our institutions would function if we were to go down this road and wind up in a place where nearly every institution and position of power was in the control of people who got their positions the same way that Arthur Sulzberger, Jr. got his--by picking the right parents.

And, of course, a society with immense inequality and thus with (a) slippage between wealth and utility, (b) in which institutions are governed by people whose meritocratic qualifications belonged to their grandparents, and (c) the principal focus of entrepreneurial energy on the part of the rest of us is to flatter the billionaire heirs and heiresses--that is not a society likely to strike any of us as incapable of vast improvement.

And, of course, the Ancien Régime and Belle Époque stories that Thomas Piketty tells are of great interest for their own sake, and not just as possible signposts for the state of things in the North Atlantic in the second half of the twenty-first century.

II. An Analytical Framework

Note that throughout this I will be using letters to mean not what Piketty defines them to mean but, rather, what neoclassical economic growth theory takes them to mean. For example, Piketty uses "g" for the growth rate of the economy. I use "g" for the growth rate of labor productivity, and add to it "n", the rate of labor force growth, to get "n+g", the growth rate of the economy.

Underpinning the growth of the economy, after all, is the rate of growth of the population and the labor force. Up until our generation, for several centuries the North Atlantic was going through the population explosion and demographic transition. That made those who inherited wealth from the big fish of the past smaller relative fish in the present.

On top of that we have the growth of labor productivity. It is not just that the number of people and workers in the economy grows. As technology improves, labor productivity grows as well. Thus even a wealth concentration that spends only its income and does not dip into capital becomes less salient over time, economically and also politically, sociologically, and culturally.

The next step, after adding n and g together to get the growth rate of the economy, we next need to add to that what I call ω, the "wedge" between the rate of accumulation and the rate of profit. Piketty doesn't call ω much of anything, which I think is a significant flaw in the way the book presents its argument, for the wedge ω is truly a key concept in the argument. Wealthholders earn, on average and in expectation, a rate of profit r on their wealth. But they don't accumulate all of what they earn: that is the wedge.

This wedge ω has, I think, six important pieces:

Progressive income and wealth taxes that take a bite out of wealthholders' resources: call this the active part of social democracy.

Tax burdens imposed to finance wars, offensive or defensive, plus the costs of being on the losing sides of wars, revolutions, and regime changes. War and revolution may well be the health of the state. War and revolution are certainly not the wealth of established wealthholders.

Liturgies by rich wealthholders: the money they give away for public or other purposes to advance their vision of what the world should become, or to play their internal in-group games of social status.

Unexpected Joseph Schumpeterian creative destruction of wealth: when the economic order is overturned by technology or fashion, and existing wealth concentrations are unable to adapt to the disruption.

Unexpected Bernie Madoffian destructive destruction of wealth: when foolish wealthholders who think they are in on the inside of some financial con learn that it is not so.

Wealthholders' wealth will grow along with the economy--the economy's wealthholders' wealth-to-annual-income ratio W/Y will be stable--as long as their wealth grows at n+g, as long as the rate of accumulation is the same as the growth rate of the economy. The salience of wealthholders in the economy--and in the polity, the society, and the culture--will be constant if the wedge ω between the rate of profit and the rate of accumulation is such as to make the rate of accumulation equal to n + g while the rate of profit is r. Thus n + g + ω is the warranted rate of profit: If the actual rate of profit r is greater than the warranted rate of profit n + g + ω, wealthholders' wealth-to-annual-income ratio W/Y will grow. If the actual rate of profit r < n + g + ω, the rate of profit that is warranted, the wealth-to-annual-income ratio W/Y will shrink. And as W/Y grows or shrinks, the actual rate of profit r shrinks or grows. The economy's wealthhlders' wealth-to-annual-income ratio thus heads for a steady-state growth equilibrium value: the value at which the actual rate of profit is equal to the warranted rate.

To the extent that a society has a high population growth rate n--one wealthy enough to have escaped Malthus's "positive check" on population growth but has not yet completed the demographic transition to two births or potential mother and thus to zero population growth--a high technology-driven labor productivity growth rate g, and a high wedge ω will tend to have a relatively low equilibrium wealth-to-annual-income ratio (W/Y)* and he relatively low wealthholder income share S. And to the extent that it is n and g that are driving this, it will have a still-lower relative share of income from inheritance in total income I. A society with a low n, g, ω will have a high equilibrium wealth-to-annual-income ratio (W/Y)* and a high wealthholder share of income S. And to the extent that it is n and g that are driving this, it will have a still-higher relative share of income from inheritance in total income I.

We know, for the past and for the foreseeable future, the course of the population and labor force growth rate n. the population and laborforce growth rate is very low before the commercial revolution during the Ancien Régime era pushes living standards in the North Atlantic up high enough to escape Malthus's "positive check". Thereafter the population growth rate rises smoothly to the peak of the population explosion, followed by completion of the demographic transition and the drop to our current zero population growth, which appears likely to persist for some generations at least.

We know, for the past, the course of the technology-driven labor productivity growth rate g. starts out very low during the Middle Ages, creeps up during the Ancien Régime, leaps ahead to 0.5% per year or so during the Industrial Revolution and the Belle Époque, and then undertakes a significant quantum jump to 2.0% per year or so as the technologies of the Aecond Industrial Revolution progress and diffuse during the 1914 to 1980 Social Democratic era. What g will be in the future is anybody's guess. Robert Gordon and company expect a fall back to something like the 0.5% per year of the Belle Époque. Others expect business-as-usual at 2.0% per year. And still others dimly foresee some kind of Singularity that make our current measures of Labor productivity as besides the point as the most keenly-watched technological economic statistic of Ur of the Chaldees--how many sheep can one shepherd sheepdogs manage?--is for our economy. Piketty's expectations are somewhere between business-as-usual and return to Belle Époque technology growth rates. And, indeed, if there is calm some kind of Singularity in our a future in a small number of generations, our Focus should be on utopian opportunities and dystopian risks that then become orders of magnitude more important than Piketty's analysis.

We know the past of the wedge ω. ω was high during the Middle Ages, a time of the Four Horsemen. The wedge ω declined during the Ancien Régime as private wars ended, state-level wars acquired rules to protect noncombatants, and what Adam Smith called "tolerable security of property" developed. The wedge ω declined even more during the Belle Époque. The long peace (U.S. Civil War aside) in the North Atlantic from 1815-1914 coupled with governments that had the power to assign and protect property rights and an eagerness to do so ensured that. But the wedge ω rose sharply during the Social Democratic era: war, revolution, confiscation, taxes to finance wars hot and even cold, and taxes to finance the great political social-democratic wave of redistribution social welfare programs made ω during 1914-1980 much higher than it had been during the Belle Époque.

We do not know the future of the wedge. I think it is important, however, to underscore how malleable it is, and how many elements enter into it. It is not just war, revolution, and confiscation plus the polity's taste for social-democratic progressive redistribution via taxes and spending programs. Conspicuous consumption and conspicuous contributions to charitable causes as ways of playing intra-elite social-status games matter to. The second of these was, in fact, Andrew Carnegie's proposed solution to what he saw as the problem of the potential dominance of inherited wealth: make it socially-uncool among the 400 to not give nearly all of your wealth away. Then there is Schumpeterian creative destruction of the wealth of heir and heiress plutocrats who want to exercise power over institutions and who have thus failed to diversify into rising industries. And, last, there is destructive destruction: legal and illegal fraud to separate from their wealth inheritor and inheritrix fools who would never have had the meritocratic chops to acquire it.

III. Characterizing Equilibrium

To say something more quantitative, we need to model the dependence of the rate of profit on the rate of profit r. Assume:

r = ρ(W/Y)^(-λ)

The rate of profit depends on (a) the raw socio-political-economic strength of wealth ρ, (b) the extent to which greater wealth accumulation enhances worker bargaining power or (if you prefer) reduces capital's marginal product, and (c) the wealth-to-annual-income rate W/Y.

Three Measures of the Salience of Wealth: We can then derive the economy's wealthholders' steady-state growth path wealth-to-annual-income ratio (W/Y)*:

(W/Y)* = [ρ/(n + g + ω)]^(1/λ)

This gives us the salience of wealth in the economy: the number of years worth of production that wealthholders command, and could spend in order to achieve their purposes. But do note that it will take a century, if not more, for an economy to converge to this steady-state value.

But (W/Y)* is not the only indicator of the salience of wealth we could be interested. We might well be more interested in the wealthholder share of income S = r(W/Y)*, the share of income that accrues to wealthholders by virtue of their ownership of property:

S = r(W/Y)* = ρ(W/Y)^(1-λ) = [ρ^(1/λ)]/[(n + g + ω)^((1-λ)/λ)]

And we might also be interested in the share of income that attributes not to all wealthholders per se but just to those who have inherited their wealth. That requires multiplying the wealth share by the inverse of the growth of the economy across the previous generation:

I = [ρ^(1/λ))]/[(n + g + ω)^((1-λ))/λ)]exp(-25(n+g))

Reflections on the Three Metrics: A few reflections on these three metrics:

As far as the wealth-to-annual-income ratio (W/Y)* is concerned, The parameter λ—-the extent to which wealthholders compete with each other for workers (or is it the speed with which diminishing returns to physical capital set in?)-—acts as a force on accumulation. The neoclassical assumption that, roughly, that λ=1, damps dynamics in inequality as a result of movements in n, g, ω, and even ρ: instead, the steady-state growth path wealth-to-annual-income ratio simply moves with ρ, and inversely with n + g + ω.

To get truly extreme dynamics needs either extreme shifts in the driving variables, or a value of λ significantly less than one. And in order to get such extreme dynamics, we need to leave economics and go into politics, sociology, and institutions. For Piketty's argument to be more than a footnote, a high W/Y must shape political economy in ways that retards the erosion of rates of profit from higher accumulation, or the shifts in the wedge ω and the political-socio-economic power of wealth ρ need to be extreme.

Breaking the neoclassical presumption that λ=1 is even more important when we look at the wealthholder share of income S: If λ=1, then S = ρ. Full stop. All of the n (population growth) and g (per capita output growth) and ω (accumulation wedge) terms drop out. And nothing other than shifts in the raw wealth share of income can drive shifts in inequality. Thus there is an even stronger urgent need to break with the default vanilla neoclassical presumptions for Piketty's argument to go through.

Looking at the share of income that comes from inherited wealth:

I = [ρ^(1/λ))]/[(n + g + ω)^((1-λ))/λ)]exp(-25(n+g))

The same considerations that applied to the wealthholder income share apply, with the added consideration that a low n and g have a double whammy in generating Piketty-type inequality. Not just does a low n and g raise the share of income that goes to wealth, but it makes the base of wealth inherited from a generation ago loom larger relative to today's economy.

Should it happen to be that λ>1, things are even worse for Piketty. That is the scenario in which accumulation leads to the euthanasia of the rentier. As wealth accumulates--as n + g + ω falls--the wealthholder share of income falls as well. Piketty needs λ<1 for his arguments to be relevant, and λ<1 by a substantial margin for his arguments to be interesting.

To further increase the size of the rock that Piketty-as-Sisyphus must roll uphill, suppose we move away from a focus on the social power of heirs and heiresses, from concern with relative income, and from spite/envy utility dynamics. Suppose we focus on the level of real wages. Then:

if λ=1, w=(1-ρ)(ρ/(n+g+ω))^(ρ/(1-ρ))(E)

where E is the efficiency of labor. The things that Piketty says raise inequality--low n, g, and ω--are also the very things that raise real wages. The coming of the plutocrats and a very high societal wealth-to-annual-income ratio is then an unmitigated boon to the working class. If we are to get any form of immiserization argument out of Piketty, we need to break λ = 1 and push it far lower.

How to break the neoclassical presumption that λ=1?

Piketty does not seem to see this as a significant difficulty. He is, after all, working primarily off of the history of France--and in large part off of the history of the late Belle Époque French Third Republic. His reference case is thus a universal (male) suffrage democracy with a strong egalitarian, anti-aristocratic, and anti-clerical ethos. Third Republic France had gone through the demographic transition: n was low. Third Republic France did not yet have the industrial research lab: g was relatively low too. Peace and good order and the absence of a culture of either extraordinary conspicuous consumption or philanthropic liturgies among the rising bourgeoisie kept ω low. And the memory of the suppression of the Paris Commune meant that the police could be relied on to keep ρ high on the shop floor.

Piketty thus assumes almost as a matter of course that the wealthier are the wealthy, the more they successfully manage the politics of the political system, even one that is in constitutional-legal terms radically egalitarian and democratic, in order to enhance the bargaining power of wealthholders. The way Piketty sees it, neoclassical economists claim that theory tells them that increasing capital-output ratios must exert strong downward pressure on the rate of profit, but experience tells us that it does not. The neoclassical assumption that λ = 1 was adopted to make sense of a world in which the wealthholder share of income did not move. But that is not the world we live in. And, the way Piketty sees it, it is profoundly silly to presume as a baseline case that the wealthholder share of income is constant--that nothing can move it--when things clearly do move it. And it is even sillier to argue from this false theory that nothing affects the wealthholder share of income that the channels Piketty points to could not affect the wealthholder share of income.

Moreover, there is another way to break the neoclassical presumption that λ=1. Humans used to have five ways of creating economic value: through backs, through fingers, through routine control, through smiles, and through creative insight:

Strong backs--usually those bathed in the steroid testosterone--could do the heavy lifting.

Nimble fingers could do the fine manipulating.

Cybernetic control loops could keep the lifting and manipulating on their proper tracks.

Smiles--in fact, an entire universe of human social interactions--could keep us as a group all pulling in roughly the same direction, playing positive-sum rather than negative-sum economic games, and could also provide the personal services from which we derive so much of our human well-being.

Genuine creative insight could think up new ways of doing things and new things to do that would be useful: luxurious or convenient, and over the course of time could transform conveniences into necessities, luxuries into conveniences, and invent yet new dimensions of luxury.

The coal, steam, and metal technologies of the First Industrial Revolution devalued the strong backs. The second and third generations of the assembly lines of the Second Industrial Revolution devalued the nimble fingers. But that was okay because every machine and every process still needed a cybernetic controller. And no alternative cybernetic controller could fit in a shoebox and run on 50 W of power. Human brains remain a unique resource, one strongly complementary with capital. With labor a complement to capital the rate of profit could not but fall with an increasing wealth-to-annual-income ratio to the extent that increasing wealth took the form of increasing numbers and sophistication of machines and processes. But now rapidly-exploding information and communications technologies are severely reducing the need for human brains as blue-collar or white-collar cybernetic controllers of machines, processes, and accounting and distribution systems. Rather than just substituting for backs and fingers and leaving brains as complements to capital, now increasing capital substitutes for brains as well. What will be left are smiles--services that are inherently and necessarily personal, "face time"--and genuine creative insight. That is the world we are moving into. And is that world still a world in which labor and capital are complements?

Big questions, all. Unresolved questions, all.

But if this neoclassical presumption that λ=1 is true, Piketty's argument largely falls apart. And if this neoclassical presumption that λ=1 is not broken in the minds of economists, Piketty's intellectual influence will be small.

IV. Historical Patterns

What does the history of the past millennium look like through the lens of this DeLongian Pikettyism?

The Middle Ages: Before 1500: When we look at northwest Europe back before 1500 we know (a) that the economy’s wealth-to-income ratio was relatively low--there was really not much that was durable and valuable, save for large things made out of stone like cathedrals and castles--(b) that the rate of economic growth was very low: on the order of 0.1%/year; and (c) that life was dangerous: nasty, brutish, and short.

n+g was low because the rate of invention and innovation was low. The rate of invention and innovation was low because not much was known--there were few giants on whose shoulders one could stand--because poor societies had low literacy rates, because market economies were limited and hobbled, and it was much more attractive to try to make one’s way in the world in the church, the army, or the bureaucracy than to try to invent stuff. A rate of n+g = 0.1%/year meant that the economy’s wealth-to-income ratio W/Y would grow until the expected rate of profit r was also a mere 0.1%/year.

War, famine, plague, disease, arbitrary confiscation by the powerful, the requirement of major donations to the church, and other factors all drove a large wedge ω between r and n+g.

If we want to make up some numbers, we can suppose: λ = 0.5; ρ = 7%/year; n+g = 0.1%/year; and ω = 7.5%/year. That then gives us a medieval rate of profit r* = 7.6%/year, an equilibrium (W/Y)* = 3.4, an equilibrium wealthholders' income share S = 26%, and an equilibrium inherited income share I = 25.3%. In such a society an enormous proportion of wealth was inherited, one way or another–-or simply stolen with or without color of law and authority.

This is a picture, but it is a fuzzy picture. Maybe this greatly understates ρ: we have not only market power to boost the profits of capital, but also various forms of extra-economic coercion. Maybe this underestimates the amount of wealth held in forms like castles and cathedrals that are not directly productive in terms of boosting GDP. But it is a place to start, for then starting in 1500 we have the era of the Commercial Revolution, the Ancien Régime in northwest Europe.

The Ancien Régime, 1500-1815: In this era we see considerably faster growth: about 0.5%/year is our consensus value for g+n. We also see a society with much more law-and-order, and with a restriction of war and arbitrary confiscation to small shares of society, at least relative to the era of private and Hundred Years Wars that had preceded it. If we assume that the wedge ω drops to 5.0%/year, we then have: the rate of profit r* = 5.5%/year, the wealth-to-annual-income ratio (W/Y)* = 6.5, S = 36%, and I = 31.8%. This is the Augustan Age, the Enlightenment Age, the age of Adam Smith--and because “tolerable security of property” allows for accumulation at an extent not possible before 1500, you see lots of authors, not just Smith, writing about how their age is uniquely progressive not or not just because of the progress of science and technology but because of thrift and good order: a civilizing process is underway. And that is a process that continues in the era of the Industrial Revolution/Belle Époque.

The Belle Époque, 1815-1914: In this era, the growth rates of western European economies more than double to about 1.2%/year. The great sectoral shift from agriculture to industry which pushes up wages, plus the opening-up of the Atlantic cause a huge wheeling from landed to commercial and industrial property. But at the level of Piketty’s analysis the important thing for the wealth-to-annual-income ratio W/Y would be that the increase in the growth rate g is outweighed by a still-further reduction in the wedge ω. Suppose it falls to 3.0%/year. Then we have: r* = 4.2%/year, (W/Y)* = 11.1, S = 47%, and I = 34.8%. And then comes the big change.

The “Short” Social Democratic Twentieth Century, 1914-1980: World War I. The Bolshevik Revolution. The Great Depression. World War II. The rise of Stalin’s Empire. Plus the coming of social democracy. Yet technological advance, the borrowing of technologies from America, and rapid post-WWII recovery produce a western European average growth rate of 3.0%/year in spite of all the disasters of 1914-1945. But that is not enough to drive a huge reduction in W/Y: you also need wartime destruction, wartime progressive taxation–the conscription to wealth to match the conscription of labor–and postwar turning of the taxes raised to create either a land fit for the heroes who won or a society in which those who lost the war could try to knit things together again. A 3.0%/year value for g, and--perhaps--a return to the pre-1800 5%/year value for the wedge ω drive the enormous 1914-1980 decrease in the wealth-to-annual-income ratio that Piketty sees. We then have: r* = 8.0%/year, (W/Y)* = 3.1 in equilibrium, S = 25% in equilibrium, and--most of all--I = 12%.

Only 12% of income flows to heirs of any sort. Only a quarter of income flows to wealthholders--down from 47% in the Belle Époque equilibrium. A wealth-to-annual income ratio lower than even that of the Middle Ages (albeit with a much higher and much more rapidly-growing standard of living). This is the middle-class, social democratic society. This is the Kuznetsian normal we thought that we had permanently--until Piketty.

The Era of Reagan: 1980-?: It is Piketty’s main thesis that all of this was upset by the political-economic reaction that happened around 1980: with the elections of Reagan and Thatcher, the exhaustion of the social democratic model, the end of the Soviet Empire and thus of any perceived need on the part of the powerful to moderate the expression of their economic power, and so forth. Piketty's guesses, if I can put them in quantitative form, are of a sharp slowdown in growth n+g to 1.5%/year or so (largely for the reasons set up by Robert Gordon) and a sharp reduction in progressive taxation, wartime damage, and revolutionary confiscation that reduce the wedge ω back down to 3.0%/year or so. This would, in the long run, carry us eventually to: r* = 4.5%/year, (W/Y)* = 9.7, S = 44%, and I = 30%.

A world in which 30% of income flows to heirs is a very different world from that with the social-democratic era's 12%. It isn't the Belle Époque's 35%. But it is close.

Of course, we are not there yet. We are at most one generation along the road. This is a process that works out its full logic only over a century or more: the dynamics says that 30 years is only enough time for us to get about two-fifths of the way from our “short” twentieth century low wealth-to-annual-income ratio to what is the ultimate equilibrium of the current era’s regime. This is Piketty’s forecast: that there is much more yet to come than we have seen in the past thirty-five years.

Don't like these numbers? Download the spreadsheet and make up your own:

V. Is It Going to Come True?

Is Piketty's forecast going to come true? Surely not. For one thing, the political consequences of a narrow close of owners of capital receiving 44% of national income and being able to buy more than nine years’ worth of GDP with their wealth would induce changes of some sort that would alter at least some of the era’s parameters in some way or other.

But if Piketty is right in his forecast of slowing growth, and if he is right in his hope that we will not again see the wealth destruction of the chaos and catastrophes of the twentieth century, then his forecast has the equations on its side if the rate of profit does not fall proportionately with a rising wealth-to-annual-income ratio, if λ<1.

Why might λ<1? Two reasons: the rise of the robots that turns capital and labor from complements to substitutes, and political economy by which greater wealth is able to buy legal protections against economic changes and forces that might erode the return on wealth, especially of inherited wealth.

That then leaves us the task of figuring out how to avoid the future of PikettyWorld. The obvious way is to increase the wedge ω, somehow, and do so via some positive-sum rather than a negative-sum process--progressive taxation, or a great increase in the speed of creative destruction, or making it uncool for plutocrats not to give almost all of it away and leave plutocratic children. The alternative is to look forward to a long and large Gilded Age indeed.

VI. Is It Worth Avoiding?

This is a relative income dystopia. Unless the gap between λ and 1 is truly large, accumulation still does raise the level of real wages. So is it worth avoiding? Higher standards of living? What's not to like?

Even if absolute immiserization is avoided:

The misdirection of entrepreneurial energy into zero- or negative-sum games is not to like. We like the Gilded Age novels of Horatio Alger--but recall how much of John Oakley's rise is based not on his pluck but on his luck. You need to catch the eye of a plutocrat who needs a special assistant, and said plutocrat needs to have a daughter. A world in which the road to wealth, power, and influence involves marrying the right spouse or tricking heirs and heiresses into bearing financial risks they do not understand is not one in which human entrepreneurial energy is properly directed.

The lack of meritocratic opportunity. Imagine if every institution had at its head--and exercising ultimate power over it--somebody with just as much in the way of meritocratic analytical and leadership chops as Arthur Sulzberger, Jr.

Then the second level of authority in our economy is held by people whose principal qualification is a successful ability to properly flatter and manage the plutocrat. "Kiss Up, Kick Down" is really not a leadership secret we want to see be the rule rather than the exception.

Simple utilitarian waste: a very large gap between the wealth our society has at its disposal and the human utility it generates when its distribution of income is massively concentrated is not a good thing. Even if you think that tournaments with very big prizes are social welfare-maximizing incentivization mechanisms, there is another enormous philosophical leap from there to inheritance.

What about the broader political-social context? A nobility--whether it is the noblesse d'epee, the noblesse de robe, or the noblesse d'ivy--with a low degree of porosity and thus of upward and downward mobility is a self-absorbed ruling class: of such ruling classes are things like the French Revolution made.

What about the broader political-social context? Historically, a natural way for an elite that has no meritocratic economic role to entrench itself is through busying giddy minds with foreign quarrels. We have the Belle Époque example of Imperial Germany--the thing that brought the whole thing down and inaugurated the horrors of the twentieth century. Do we really want plutocrats and their ideologues pushing for a Weimar Russia, Wilhelmine China, a National-Greatness Conservatism America?

What about the broader political-social context? A world in which plutocrats have power and buy large numbers of clients is one that pursues goals distant from those of the greatest good of the greatest number. Recall Kart-Hadesht. Recall the enormous wealth and power of its Thunderbolt clan. It was his clan wealth and ability to hire mercenaries that enabled Grace-of-Baal to continue his clan's generations-long feud with the Roman Republic--and in spite of the stunning victories of Trebia, Trasimene, and Cannae, that did not end well for Kart-Hadesht.

A politics that involves the provision of bread-and-circuses--all of us then become bit players in a 1970s Jerry Pournelle novel.

David Lodge on the Belle Époque, from the third volume of his Academic Trilogy: Nice Work: “Robyn hastens to her conclusion. 'Unable to contemplate a political solution to the social problems they described in their fiction, the industrial novelists could only offer narrative solutions to the personal dilemmas of their characters. And these narrative solutions are invariably negative or evasive. In Hard Times the victimised worker Stephen Blackpool dies in the odour of sanctity. In Mary Barton the working-class heroine and her husband go off to the colonies to start a new life. Kingsley’s Alton Locke emigrates after his disillusionment with Chartism, and dies shortly after. In Sybil, the humble heroine turns out to be an heiress and is able to marry her well-meaning aristocratic lover without compromising the class system, and a similar stroke of good fortune resolves the love stories in Shirley and North and South. Although the heroine of George Eliot’s Felix Holt renounces her inheritance, it is only so that she can marry the man she loves. In short, all the Victorian novelist could offer as a solution to the problems of industrial capitalism were: a legacy, a marriage, emigration or death...'"

At least it’s a wealthy dystopia. At least it's not a statist, panopticon dystopia…

The reference of course, is to Hicks (1937): “Mr Keynes and the ‘Classics’: A Suggested Interpretation”. An important, sprawling book of economic analysis. A complex and nonobvious relationship to a previous economics literature. Large political economy and policy stakes at hazard. Is this John Maynard Keynes's General Theory of Employment, Interest, and Money? Or is this Thomas Piketty’s Capital in the Twenty-First Century? READ MOAR